Product Liability

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Product Liability
(c) J. Thomson 2006, 2009, 2011
1
Product Liability
Originally, no perceived need to
protect buyers/ consumers. Motto was
Caveat emptor – let the buyer
beware. Look after yourself.
(c) J. Thomson 2006, 2009, 2011
2
Product Liability
Parliaments began to feel need to
regulate sale-and-purchase
transactions. Began, in late 1800’s in
England, with the Sale of Goods Act.
However the SGA was not designed
to protect consumers – was designed
to protect sellers, who were more
politically influential with ruling
classes.
(c) J. Thomson 2006, 2009, 2011
3
Sale of Goods Acts
Sale of Goods Act copied in Australia from
the original SGA in England.
State , not Commonwealth, legislation.
Regulated sales of goods only, not services
Not designed to protect consumers. Designed
to protect Sellers
Most clauses that might be useful to buyers –
e.g. clauses making sellers liable for defects in
products – can be excluded.
Some important differences between SGAs of
different states – so not very easy to use in
interstate trade.
(c) J. Thomson 2006, 2009, 2011
4
Rise of Consumer Protection
Post WW II – Rise of advertising, rise of
importance of consumers.
1950’s and 60’s – number of scams which played
on vulnerabilities of consumers, especially were
these unable to access information re products
except through advertisements which might be
misleading -> consumer anger, which translated
into political pressure.
Commonwealth government saw need to respond
with Australia- wide legislation.
Result: Trade Practices Act - a piece of
Commonwealth legislation dating from 1974 and
now updated with introduction of the Competition
and Consumer Act 2010
(c) J. Thomson 2006, 2009, 2011
5
Trade Practices Act
TPA was greatly enlarged since its inception.
Recently further modified by the major
amendments in the Trade Practices Amendment
(Competition and Consumer Affairs) Act, which
also includes, as Schedule 2, the Australian
Consumer Law Covers aspects of trade
from unfair practices e.g. coercive conduct, illegal
boycotts, price fixing
to laws relating to misleading and deceptive advertising
and laws relating to who shall bear the responsibility for
products that are faulty and cause harm.
Also covers aspects of services too – e.g. when services
are misdescribed, or when their provision is shoddy, or
products used are substandard. If users hurt, who is
liable?
(c) J. Thomson 2006, 2009, 2011
6
Layers of sales legislation
How does Commonwealth law fit in with state
legislation?
If there is a corporation and a consumer engaging in a
transaction under o defined circumstances then the best
law to use will be the Australian Consumer Law as
administered by the Commonwealth.
If you have a consumer but no corporation, then suggest
you could use Australian Consumer Law as administered
by either Commonwealth or state (it is going to be a joint
administration and enforcement regime anyway).
But there are times when there will be neither a
consumer as defined in the Act nor a corporation and in
this case only the state SGAs will apply.
(c) J. Thomson 2006, 2009, 2011
7
What aspects of sales contracts
need special protection?
Title – right of seller to sell goods and of
buyer to receive quiet possession
Correspondence with description – if goods
sold by description, that they will
correspond with that description.
Fitness for purpose – under certain situations,
goods must be reasonably fit for the (specific)
purpose for which they are sold
Merchantable quality - under certain situations,
goods must be of general merchantable
quality.
Sale by sample – if buying by sample, want to
be sure the bulk, when it arrives, will
correspond with sample in quality, and also
that the goods will be free from defects.
(c) J. Thomson 2006, 2009, 2011
8
Implied terms
Change brought about by SGA
originally, and now repeated by
Australian Consumer Law is that
these terms of title, Correspondence
with description, fitness for purpose ,
merchantable quality and sale by
sample are now automatically implied
into/ guaranteed for all sales
contracts.
(c) J. Thomson 2006, 2009, 2011
9
Implied terms
implied term is one which is part of
the contract without being stipulated
or written in. It is understood, taken
for granted. But it still forms just as
much a term of the contract as do
verbal or written terms and can still be
enforced in courts of law.
(c) J. Thomson 2006, 2009, 2011
10
Implied terms/ guarantees
Even though the terms might be implied
into the contract by a piece of Federal
legislation – e.g. ACL – once they are there
IN the contract, any breach of them is
remedied in the State courts, exactly the
same as any other breach of contract. A
breach of the implied condition is a breach
of contract, not a breach of the legislation
which implied the term into the contract.
(Zalai v Col Crawford; Arturi v Zupps.)
(c) J. Thomson 2006, 2009, 2011
11
Implied terms
Damages available for breach of implied
condition are, like all contract damages,
subject to rule of contractual forseeability
rules in Hadley v Baxendale – not to
penalties for breach of ACL. So get
contract damages for all reasonably
foreseeable harm and for such harm which,
although not foreseeable to an ordinary
person at time of contracting was
nevertheless within the contemplation of
the parties due to information exchanged
prior to completion of the contract.
(c) J. Thomson 2006, 2009, 2011
12
Conditions & warranties
(express or implied)
N.B. Breach of condition entitles
innocent party (here – buyer) to
terminate the contract AND seek
damages for loss,
breach of warranty only entitles
innocent party/ buyer to damages.
(c) J. Thomson 2006, 2009, 2011
13
Seller’s liability
In Sale of Goods
Act 1895 (W.A.)
(c) J. Thomson 2006, 2009, 2011
14
Sale of Goods Act implied
terms
Title – s12 - implied condition that S
has right to sell the goods and implied
warranties that B shall enjoy quiet
possession & goods are free from
undisclosed encumbrances.
Correspondence with Description
S13 – implied condition that where
goods sold by description they will
correspond with that description.
(c) J. Thomson 2006, 2009, 2011
15
Sale of Goods Act implied
terms
Fitness for (specific) purpose – S 14(1)
implied condition that where B –
Expressly or by implication makes
known to S the particular purpose for
which goods required,
So as to show that B relies on S’s skill &
judgment,
And the goods are of a description which
it is in the course of S’s business to
supply,
[continued]
(c) J. Thomson 2006, 2009, 2011
16
Sale of Goods Act implied
terms
[Continued]
then the goods will be reasonably fit
for such purpose,
Except where the sale is of a
specified article under its brand /
patent name.
(c) J. Thomson 2006, 2009, 2011
17
Sale of Goods Act implied
terms
Merchantable quality – s 14(2) implied
condition that
where goods are bought by description
From a S who deals in goods of that
description
The goods will be of merchantable
quality
Except – if B has examined goods, there
is no condition as regards defects that
such examination ought to have
revealed.
(c) J. Thomson 2006, 2009, 2011
18
Sale of Goods Act implied
terms
Sale by sample – s 15(2) implied condition
that where goods sold by sample
the bulk will correspond with sample in
quality,
that B will have reasonable opportunity of
comparing bulk with sample and
that goods free from any defect rendering
them unmerchantable which would not be
apparent on reasonable examination of
sample
(c) J. Thomson 2006, 2009, 2011
19
SoG Correspondence with
Description s13 – Detail
if goods were sold by description, they
must correspond with that description.
Most goods are sold by description.
B must rely on description to a substantial
degree. (Not difficult to prove)
Goods bought on strength of verbal
representations or adverts must be sold on
basis of description – Varley v Whipp –
‘nearly new’ reaper
(c) J. Thomson 2006, 2009, 2011
20
SoG Correspondence with
Description
Even if viewed by purchaser, sale could
still be by description – Beale v Taylor 1961 Herald convertible advert.
Note section goes to identity of goods
described, not to their quality. Defective
goods can still correspond with description
– Ashington Piggeries v Christopher Hill adulterated Norwegian herring meal was
still Norwegian herring meal.
(c) J. Thomson 2006, 2009, 2011
21
SoG Correspondence with
Description
Problem – at some unclear point,
identifying characteristics (quality) become
defining characteristics. Lockhart v Osman
– impotent stud bull did not conform to
description.
Description of goods can extend to
packaging - Re Moore & Landauer – gds
sold ‘30 tins to case’ rejected when arrived
packed 24 tins to a case (Correct overall
number).
(c) J. Thomson 2006, 2009, 2011
22
SoG Correspondence with
Description
Brand name is part of description –
order for Levi jeans not filled by
sending equivalent number of CK
jeans.
(c) J. Thomson 2006, 2009, 2011
23
SoG Fitness for (specific)
Purpose s14(1)
Implied condition that where B expressly or
by implication makes known to S the
particular purpose for which goods
required, so as to show that B relies on S’s
skill & judgment, and the goods are of a
description which it is in the course of S’s
business to supply, then the goods will be
reasonably fit for such purpose, Except
where the sale is of a specified article
under its brand / patent name.
(c) J. Thomson 2006, 2009, 2011
24
SoG Fitness for (specific)
Purpose
Purpose for which goods are to be
purchased can be inferred if goods have
only one normal use – Priest v Last, hot
water bottle.
If goods have more than one normal use, B
to ensure that S knows for which particular
purpose he is buying goods. (Otherwise
S’s defence is to show that goods are fit for
any ONE of the purposes for which such
goods normally bought)
(c) J. Thomson 2006, 2009, 2011
25
SoG Fitness for (specific)
Purpose
Reliance on S’s skill & judgment - B must
let S know in some way that this is
occurring, but appears v easy to infer that
reliance is present. Partial reliance is
sufficient. David Jones v Willis – walking
shoes – inferred reliance was on shop
stocking sound shoes.
Reliance must be reasonable – B cannot
know more about goods than S.
(c) J. Thomson 2006, 2009, 2011
26
SoG Fitness for (specific)
Purpose
goods of description that it is in
course of S’s business to sell – is
question of historical fact.
(c) J. Thomson 2006, 2009, 2011
27
SoG Fitness for (specific)
Purpose
No implied term of fitness where
goods sold under brand name IF this
negates reliance on S’s skill (it often
does not) - Baldry v Marshall –
comfortable touring car – Bugatti.
(c) J. Thomson 2006, 2009, 2011
28
SoG Merchantable Quality
s14(2)
implied condition that where goods
are bought by description from a S
who deals in goods of that description
the goods will be of merchantable
quality Except – if B has examined
goods, there is no condition as
regards defects that such examination
ought to have revealed.
(c) J. Thomson 2006, 2009, 2011
29
SoG Merchantable Quality
Whether goods are of merchantable quality
depends on facts of each case, bearing in
mind price and description of goods.
Ask if goods would be commercially
saleable for some normal purpose to Bs
knowing actual state of goods, at price not
significantly below original contract price.
Goods to be merchantable at time of sale
and delivery and for reasonable time after.
(c) J. Thomson 2006, 2009, 2011
30
SoG Merchantable Quality
If merchantable goods are mixed in
consignment of unmerchantable
goods, B can reject the wholeJackson v Rotax – motor horns.
Examination & defects – S cannot rely
on exemption is B does not examine
goods, or if defect not reasonably
evident – Grant v Australian Knitting
Mills
(c) J. Thomson 2006, 2009, 2011
31
Interplay: fitness for purpose
& merchantable quality
Suppose I want to buy car to cross desert strewn
with rocks.
Go to garage, state needs, am sold low sports car
which would be great around town, no defects, but
whose sump hits rocks crossing desert.
Car is of merchantable quality, but not fit for
specific purpose I stipulated (crossing rock strewn
desert)
Back to garage, same needs. Am sold Range
Rover, which clears rocks beautifully but has
defective gearbox and breaks down at Kalgoorlie.
Car was fit for purpose, but not of merchantable
quality.
(c) J. Thomson 2006, 2009, 2011
32
SoG Sale by Sample s15(2)
Goods to be free of any defect rendering
them unmerchantable which would not be
apparent on reasonable examination of
sample – Drummond v Van Ingen – cloth
known to be for resale to tailors, was
supplied by sample, and corresponded with
sample. However material was unsuitable
for use in clothing as thread gave way
under normal wear.
Could be rejected as had unmerchantable
defect and this not apparent from sample.
(c) J. Thomson 2006, 2009, 2011
33
SoG exclusion of implied
terms s54
Possible under s54 Sale of Goods Act (WA)
IF –
Exclusion clause incorporated into contract
between S & B - not post contractual –
Olley v Marlborough Court
The words of the exclusion clause were
clear and unambiguous – construed contra
proferens – White v Jn Warwick
(c) J. Thomson 2006, 2009, 2011
34
Liability under
Australian
Consumer Law
2010
(c) J. Thomson 2006, 2009, 2011
35
Consumer contracts and
guarantees / implied terms
Guarantees/ implied terms are similar
to those in SGA, but non-excludable
in consumer contracts where supplier
is ‘person’ (which includes
corporations).
(c) J. Thomson 2006, 2009, 2011
36
(Simplified) “person” under
ACL (Commonwealth courts)
•A Pty Ltd company or an Ltd
company.
•A natural individual in interstate/
overseas trade or commerce –
ACCC v Chen (2003) FCA 897
(c) J. Thomson 2006, 2009, 2011
37
Consumer contracts and
Australian Consumer Law
‘consumer’ in s3 – where
Price of goods or services is $40,000 or
less
If price over $40,000m then still a
consumer if goods/ services bought are
of a type normally acquired for personal,
domestic or household use or
consumption, or commercial road
vehicle.
So long as goods not acquired/
[continued]
(c) J. Thomson 2006, 2009, 2011
38
Consumer contracts and
ACL
[Continued]
Or represented as being acquired for
resupply or using up or transforming
in trade or commerce in the course of
production or manufacture or of
repairing them or treating other
goods/ fixtures on land
(c) J. Thomson 2006, 2009, 2011
39
Seller’s Liability
under ACL
(c) J. Thomson 2006, 2009, 2011
40
Australian Consumer Law
guarantees/ implied terms
–
S56 – goods sold by description are
to correspond with that description.
S57 – sale by sample.
(c) J. Thomson 2006, 2009, 2011
41
ACL Guarantees/ implied
terms – fitness for purpose
S 55 Akin to SGA but no exclusion of
implied fitness for purpose where
goods are bought under brand name
reasonable reliance on S’s skill and
judgment is presumed and S must
negate this and establish non-reliance
(or unreasonableness of reliance) if
(s)he wants to claim this as a
defence.
(c) J. Thomson 2006, 2009, 2011
42
ACL Guarantees/ implied
terms – acceptable quality
S 54 “goods are of acceptable quality if
they are as:
(a) fit for all the purposes for which goods of that kind are
commonly supplied; and
(b) acceptable in appearance and finish; and
(c) free from defects; and
(d) safe; and
(e) durable;
as a reasonable consumer fully acquainted with the state
and condition of the goods (including any hidden defects of
the goods), would regard as acceptable ………..
(c) J. Thomson 2006, 2009, 2011
43
ACL Guarantees/ implied
terms – acceptable quality
….. having regard to
(a) the nature of the goods; and
(b) the price of the goods (if relevant); and
(c) any statements made about the goods on any packaging
or
label on the goods; and
(d) any representation made about the goods by the supplier
or
manufacturer of the goods; and
(e) any other relevant circumstances relating to the supply of
the
goods.
(c) J. Thomson 2006, 2009, 2011
44
Rassell v Garden City Vinyl &
Carpet Centre
The Rassells purchased expensive
wool carpeting for new home from
Defendant, who imported it from NZ.
Carpet soon began to develop
watermarks. Rassells sued.
Defendant a deemed manufacturer
(imported carpet). Carpet not
reasonably fit for purpose, nor of
merchantable quality – damages.
(c) J. Thomson 2006, 2009, 2011
45
Services & ACL consumer
contracts Pt 3-2 subdivision B
S60 - implied guarantee that services will
be rendered with due skill and care and
s61 that any materials supplied will be
reasonably fit for the purpose. Also that
services will be reasonably fit for the
purpose or result specified by the
consumer.
“services’ – include provision in course of
trade of any rights, benefits, privileges or
facilities as well as use or enjoyment of
facilities for amusement, entertainment,
recreation or instruction.
(c) J. Thomson 2006, 2009, 2011
46
Breach of guarantees – major/
minor ss 259 – 262 ACL
Basically, s259 allows a consumer to
bring an action against a supplier
where a guarantee implied by Div3-2
(e.g. s151) is not complied with and
this leads effectively to a breach of
condition (i.e. a major breach) of the
contract.
(c) J. Thomson 2006, 2009, 2011
47
Supplier vs manufacturer of
defective goods
If customer brings action against
supplier/ retailer of defective goods,
s274 ACL gives retailer right of
indemnification against manufacturer.
(c) J. Thomson 2006, 2009, 2011
48
Exclusion clauses & ACL
contracts
S64 forbids exclusion, restriction or
modification of liabilities for breach of
implied terms of (almost all ) consumer
contracts.
BUT s64A allows limitation of liability for
consequential loss or damage in respect of
contracts of any value (including under
$40,000) where goods/ services are NOT
of a type normally bought for personal,
domestic or household use AND it is
reasonable for S to rely on this.
(c) J. Thomson 2006, 2009, 2011
49
Exclusion clauses & ACL
contracts
This means that where goods/ services,
even under $40,000 are not of a type… etc
the S may limit his liability for breach of
obligations to replacement/ repair of goods/
supply of equivalent goods or re-performance of services if this (must be included in
contract) limitation is fair in light of relative bargaining power of the parties,
Availability of goods/services from
alternative source
Whether goods were custom made.
(c) J. Thomson 2006, 2009, 2011
50
Exclusion clauses & ACL
contracts
Mayne Nickless v Crawford – MN installed
alarm system for C, stating backup existed
if phone lines cut. Exclusion clause re any
conditions, warranties etc.
MN had provided services to a consumer
(under $40,000) – so goods to be
reasonably fit for purpose specified – which
they were not (wires could have been
protected better).
(c) J. Thomson 2006, 2009, 2011
51
Exclusion clauses & ACL
contracts
[continued]
BUT – although goods under
$40,000, so C was consumer, they
were not of type normally bought for
personal, domestic use etc… so
liability of MN could be limited under
68A in respect of consequential loss
and damage, if this fair in circs.
(c) J. Thomson 2006, 2009, 2011
52
Exclusion clauses and ACL
Effect on contract -Attempt to exclude
implied terms eg fitness for purpose,
merchantable quality, sale by description
etc and other statutory rights (eg to
refunds) normally void – s64.
Effect on Seller - misrepresentation of
existence or effect of any rights under
statute breaches s151(1)(m) also .
(c) J. Thomson 2006, 2009, 2011
53
Exclusion clauses and ACL
Miller v Fiona’s Clothes Horse – TPA
provides for right of refund in certain
circs. Signs refusing refunds in store
breached s53(g) [151(1)(m)] re
existence of this non-excludable right.
Guarantees are in addition to, not
substitution for, statutory rights. If
guarantee has expired, may still be
able to exercise statutory right.
(c) J. Thomson 2006, 2009, 2011
54
ACL overrides SGA for
consumer contracts
Any time there is a consumer within the definition
of the ACL, it will apply at either state or
Commonwealth level.
Clear demonstration of legislative Intent to Cover
the Field of consumer contracts – which means
that SGA can only now apply to contracts where
goods cost > $40,000 and NOT of type etc.
(c) J. Thomson 2006, 2009, 2011
55
Manufacturer’s
Liability to
consumer purchaser for
defective goods
(c) J. Thomson 2006, 2009, 2011
56
DIRE WARNING !!!!!
Whatever your text says, in real life
(and in real courts) the obvious and
natural person against whom Buyer
will take action for defective goods is
the SELLER.
ONLY PROCEED AGAINST
MANUFACTURER IN VERY
LIMITED CIRCUMSTANCES!
(c) J. Thomson 2006, 2009, 2011
57
Suing manufacturer for
defective goods
Suppose Seller is about to go out of
business – no point in suing them –
no money. In this case, only person
against whom you can bring action is
manufacturer.
2 lines of attack on manufacturer –
Common Law and ACL .
(c) J. Thomson 2006, 2009, 2011
58
Common Law Manufacturer’s
Liability : Negligence
Fair, becauseManufacturer, not retailer, is in best
position to prevent defective goods
from reaching marketplace via quality
control measures.
Manufacturer also capable of
compensating consumers via product
liability insurance.
(c) J. Thomson 2006, 2009, 2011
59
Common Law manufacturer’s
liability - Donoghue v Stevenson
Snail in bottle – manufacturer’s
liability to ultimate consumer. Based
on –
Duty of care being owed to foreseeable
Plaintiff
Breach of duty of care
Causing harm
Which was foreseeable and not too
remote
(c) J. Thomson 2006, 2009, 2011
60
Common Law manufacturer’s
liability for Negligence
Now extended to liability to all persons, not
just consumer’s, within foreseeable range
of products harmful effects.
Liability for negligence encompasses all
classes of goods and the provision of
services.
Liability in negligence will be for property
damage or replacement as well as for
personal injury.
(c) J. Thomson 2006, 2009, 2011
61
Limitations on Common Law
liability for Negligence
Liability can be avoided by showing
duty of care does not exist, e.g., to
abnormally sensitive persons (not
reasonably foreseeable plaintiffs).
Levi v Colgate-Palmolive – bath salts.
(c) J. Thomson 2006, 2009, 2011
62
Basic Common Law Test for
Negligence – Wyong Shire
Council v Shirt
Would a reasonable person in the
Defendant’s position have foreseen that his
conduct involved a risk of injury to the
plaintiff / class of persons including the
plaintiff?
If so, did the defendant do what a
reasonable person have done by way of
response to such risk? Take into account
the magnitude of risk and likelihood of
harm. Also expense, difficulty etc of taking
alleviating action.
(c) J. Thomson 2006, 2009, 2011
63
Common Law - Manufacturer’s
negligence with respect to its
product
Vacwell Engineering v BDH
Chemicals - boron tribromide known
to emit toxic vapour, D didn’t know it
would explode on contact with water,
though this fact could be easily found
in books. Manufacturer liable in
negligence for not doing adequate
research and warning Purchaser.
(c) J. Thomson 2006, 2009, 2011
64
Common Law Examples of
manufacturer’s negligence
In production process – Donoghue v
Stevenson – foreign object in food
In product design – where product
basically unsafe – lead paint on
children’s cots, flammable nightwear.
In packaging – Adelaide Chemical v
Carlyle – sulphuric acid in breakable
earthenware jars.
(c) J. Thomson 2006, 2009, 2011
65
Common Law Example of alleged
manufacturer’s negligence
In marketing – Norton Australia v Streets
Ice Cream - adequate warning of volatile
vapours from adhesive product, through
label on drum. Nearby use of naked flame
unforeseeable.
For warnings, consider wording,
prominence, and location of warning (on
goods or on accompanying leaflet). Even
choice of brand name relevant – Maize v
Atlantic Refining (Safety-Kleen)
(c) J. Thomson 2006, 2009, 2011
66
Statutory liability under ACL
Pt 5-4 Div 2 ss 271 - 273
Tort of negligence not always adequate to protect
user/ consumer of defective products.
s ACL imposes strict liability (no defence to show
reasonable care) on manufacturer/ deemed
manufacturer for consumer or person deriving title
from consumer (“affected person”), injured by/
suffering loss from defective product.
“Manufacturer” includes corporation that is
represented as manufacturer of goods which it
imported / home-branded etc. Also includes person
holding self out to public as manufacturer and the
importer of goods where actual manufacturer has no
place of business in Australia.
(c) J. Thomson 2006, 2009, 2011
67
TPA action - Rassell v Garden
City Vinyl & Carpet Centre
Defendant a deemed manufacturer
(imported carpet). Carpet not
reasonably fit for purpose, nor of
merchantable/ acceptable quality –
damages.
(c) J. Thomson 2006, 2009, 2011
68
Statutory liability under ACL
Pt 5-4 Div 2 s271
Obligations under s271 arise only
after contract for supply of goods
entered into between consumer and
retailer. Sec 7 definition of ‘affected
person”.
Right to compensation limited to
consumer who acquires goods/
anyone acquiring goods from such
consumer (ie bystander members of
purchaser’s household can’t bring
action under s271).
(c) J. Thomson 2006, 2009, 2011
69
Statutory liability under ACL
Pt 5-4 Div 2 s276
No exclusion of liability/ contracting
out by manufacturer under this Part.
(c) J. Thomson 2006, 2009, 2011
70
Statutory liability under ACL
Obligations imposed on
manufacturers are that goods are –
Correspond with description
Of merchantable quality
Able (within reason) to be repaired
Comply with any express warranty
(c) J. Thomson 2006, 2009, 2011
71
Acceptable/ merchantable quality
and manufacturer’s liability
Manufacturer is not liable for failure of
merchantable quality which occurred
after goods left manufacturer’s
control.
(c) J. Thomson 2006, 2009, 2011
72
TPA action : Medtel P/L v
Courtney
Courtney had pacemaker (made in US, but
branded as Australian product ) implanted.
Similar pacemakers proved unreliable, and
Courtney advised to have replacement
implanted.
Courtney sued for trauma of further
operation, despite fact that his pacemaker
had not actually failed.
Courtney succeeded – goods not of
acceptable/ merchantable quality.
(c) J. Thomson 2006, 2009, 2011
73
ACL: Liability for
repairability
Manufacturer obliged to ensure availability
of spare parts and repair facilities, or warn
at time of purchase of unavailability of
these facilities. Failure to do so -> liability if
manufacture has acted unreasonably. No
liability if, for instance, strike at
manufacturer’s factory prevented
manufacture of spare parts. Panasonic
Australia v Burstyner
Existence of independent repairers fulfils
requirement.
(c) J. Thomson 2006, 2009, 2011
74
Express warranties &
manufacturers
Express warranty = undertaking, assertion
or representation by/ with consent of
manufacturer, re quality, performance or
characteristics of goods as well as re
availability of related services, parts or
replacements, in connection with supply of
goods or services.
Must have natural tendency to induce
persons to acquire goods – not just puffery.
(c) J. Thomson 2006, 2009, 2011
75
Limitation of liability
No contracting out of liability to indemnify
supplier under s 274, where goods of a
kind normally acquired for personal,
domestic or household use or
consumption.
Under s276A,where goods NOT of a kind
normally acquired for personal, domestic or
household use or consumption –whatever
the cost - manufacturer can limit liability to
supplier for compensation for
consequential loss/ damage if this fair &
reasonable.
(c) J. Thomson 2006, 2009, 2011
76
Manufacturer’s
Liability under
ACL extends to
innocent nonconsumers of
defective goods
(c) J. Thomson 2006, 2009, 2011
77
ACL Pt 3-5
Pt 3-2 and Pt 5-4 protect consumers, ie
purchasers, and persons deriving title
under them.
Pt 3-5 ss 138- 141 impose wider, strict,
liability on manufacturers for individuals (eg
members of consumer’s household,
guests, bystanders) injured as result of
defective product. No need to prove
negligence on part of manufacturer/
deemed manufacturer which, in trade or
commerce, supplies defective goods
which cause loss - s 138.
(c) J. Thomson 2006, 2009, 2011
78
ACL Pt 3-5
As before, “manufacturer” includes
corporation that is represented as
manufacturer of goods which it imported /
home-branded etc. Also includes the
importer of goods where actual
manufacturer has no place of business in
Australia.
(c) J. Thomson 2006, 2009, 2011
79
ACL Pt 3-5
Goods are defective under Pt 3-5 if their
safety is not such as persons are generally
entitled to expect. S9(1). Retrospective
test.
Consider –
Manner in which goods marketed
Purposes for which goods marketed
Packaging of goods
Instructions with goods
Reasonable expectations re use of
goods.
(c) J. Thomson 2006, 2009, 2011
80
Defective products under Pt3-5
Need also consider –
Price of product
Nature of product
Community knowledge of product as
inherently risky
Warnings on label may not be effective
where manufacturer aggressively promotes
product as safe. Maize v Atlantic Refining
Co (Safety Kleen)
Liability not excludable
(c) J. Thomson 2006, 2009, 2011
81
Problems re test for Defective
products
Depending on sophistication,
education etc, consumers will have
different expectations re safety. Who
sets the standard? Rational person?
“Average” person?
Advertisers also mould community
expectations (re safety) to their own
benefit.
(c) J. Thomson 2006, 2009, 2011
82
ACL Pt 3-5
Claimants could include
Persons suffering personal injury s138
Persons suffering (non business, nonprofessional) loss as result of injury
suffered by another individual s139
Persons suffering loss as result of
damage to (non-defective) goods of a
kind normally acquired for personal,
domestic or household use or
consumption s140
(c) J. Thomson 2006, 2009, 2011
83
ACL Pt 3-5
Claims could also include
Loss suffered by person as result of
damage to land, buildings or
fixtures normally acquired for
private use 141
[ Note: claims for damage to defective
goods made against manufacturer are
covered by Pt 5-4 Div 2]
(c) J. Thomson 2006, 2009, 2011
84
ACL Pt 3-5 - CASES
Glendale Chemicals v ACCC &
Barnes – Glendale a deemed
manufacturer, gave some warnings
but didn’t warn against use of hot
water with caustic soda.
Lack of warning re serious hazard
constituted ‘defect’ in goods, which
caused harm to Barnes.
(c) J. Thomson 2006, 2009, 2011
85
ACL Pt 3-5 - CASES
Thomas v Southcorp Australia Pty Ltd –
Thomases purchased Vulcan ducted gas
heater. High-temperature cut-out switch
failed to work and house fire resulted. They
sued manufacturer.
Thomases were able to gain compensation
for damage to contents and structure of
home, because heater clearly defective in
causing fire.
(c) J. Thomson 2006, 2009, 2011
86
Losses to which Pt 3-5 doesn’t
apply
No compensation for damage to
commercial property
Damage to defective goods
themselves has to be claimed under
Pt 5-4 Div 2.
(c) J. Thomson 2006, 2009, 2011
87
Main Defences – s142
Defect did not exist at time of supply by
actual manufacturer.
Defect existed only because of compliance
with a mandatory (not consensual)
standard.
Defect undiscoverable by science/
technology at time when goods supplied
Goods were incorporated in other goods &
defect arose from incorporation/ new
packaging etc.
(c) J. Thomson 2006, 2009, 2011
88
Graham Barclay Oysters P/L v
Ryan
Ryan (and others) contracted Hepatitis
through eating oysters grown by Barclay
Pty Ltd. There was known risk that oysters
might have viral contamination after rain,
but they had been marketed without
warning.
Held: oysters were defective, but there was
no scientific test which would have enabled
defect to have been inevitably discovered
at that time. Existing tests not reliable and
destroyed oyster. Barclays not liable.
(c) J. Thomson 2006, 2009, 2011
89
PRODUCT
SAFETY
STANDARDS
WHICH CAN BE
IMPOSED UNDER
TPA
(c) J. Thomson 2006, 2009, 2011
90
Product Safety Standards
Under Pt 3-3 s104 ACL, regs can be
proclaimed where reasonably necessary to
prevent/ reduce risk of injury.
Regs can prescribe performance,
composition, methods of manufacture,
packaging of goods
Can also mandate testing
And require markings, warnings or
instructions to accompany goods.
(c) J. Thomson 2006, 2009, 2011
91
Product Safety Standards
If there is an existing consumer product
safety standard, it is illegal for corporation
in trade or commerce to supply goods
which fail to comply with this - pecuniary
penalty
Could catch anyone in distribution –
manufacturer, importer, wholesaler,
retailer. ACCC v Starite Distributors &
Dimmeys Stores – non-complying bicycles
(c) J. Thomson 2006, 2009, 2011
92
Dangerous consumer goods
if liable to cause death/ physical
injury, goods can be Investigated
Public warning published – s65B TPA
Product safety standard prescribed
Declared unsafe and banned – s65C
Those in circulation recalled
(c) J. Thomson 2006, 2009, 2011
93
Banning sale of goods
occurs if goods entail imminent risk
of death or serious injury/ serious
illness.
Offence to supply banned goods to a
consumer or where likely to be used
by consumer – Clarke v New Concept
Imports – sale of unsafe balloons to
be given away.
(c) J. Thomson 2006, 2009, 2011
94
Recall of goods
If goods have been banned, do not
comply with existing product standard
or A-G considers them dangerous.
Supplier may be subject to pecuniary
penalties.
(c) J. Thomson 2006, 2009, 2011
95
SUMMING UP
(IMPORTANT!)
(USEFUL!!)
(c) J. Thomson 2006, 2009, 2011
96
Summing Up
Must use Sale of Goods Act where goods
cost > $40,000 AND not of a type normally
bought for personal, domestic or household
use or consumption.
Use state enforcement of Australian
Consumer Law where goods cost <
$40,000 or if > $40,000, goods are of a
type normally bought etc, especially if
supplier is not a corporation or a natural
individual in interstate/ overseas trade or
commerce.
(c) J. Thomson 2006, 2009, 2011
97
Summing Up
Use Commonwealth ACL where goods
cost < $40,000 or if > $40,000, goods are
of a type normally bought etc AND in either
case supplier IS a corporation in trade or
commerce or natural individuals in
interstate or overseas trade & commerce
and those making misleading and
deceptive marketing statements over
internet, phones, post, TV, radio).
(c) J. Thomson 2006, 2009, 2011
98
Summing Up
When using ACL consider using
Pt 3-2 for consumer to sue retailer (usually
FIRST & BEST choice)
Part 5-4 Div 2 if consumer/ person deriving title
through consumer is harmed and need to sue
manufacturer (eg because retailer is bankrupt)
Pt 3-5 if any person (e.g. innocent bystander)
is harmed and need to sue manufacturer
(because no contract between innocent
bystander and Seller).
(c) J. Thomson 2006, 2009, 2011
99
(c) J. Thomson 2006, 2009, 2011
100
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